The UK government is likely to rule that online betting exchanges can operate without tax or regulation, despite the recommendations of an all-party joint scrutiny committee that reviewed the proposed new gambling legislation. Tessa Jowell, head of the Department of Media, Culture and Sport (DCMS), is expected to announce the decision this month. The government is reportedly concerned at being seen by business as too bureaucratic.

The decision is a bonus for the betting exchanges, but it is certain to provoke fierce opposition from established bookmakers, the betting exchanges’ most vociferous critics. It seemingly undermines remarks made by the UK chancellor Gordon Brown, who suggested in his recent budget that he would consider raising tax revenue from betting exchanges.

Betting exchanges have come under the spotlight this year with allegations that they allow the integrity of sports and racing to be compromised. After allegations of race fixing in UK horse racing, the joint scrutiny committee’s report called for means of preventing bookmakers using the exchanges as private ‘layers’ of bets.

The committee said it anticipated the chancellor’s ideas on how to tax bettors and layers on the exchanges, stating: “the Inland Revenue may wish to impose regulatory requirements .. . as part of money laundering or taxation arrangements”.